Considerations for taking a sizable break from working

Question

The Proposition

From time to time, my wife and I consider the "foolish" idea of leaving our jobs (and, likely, careers) and taking a sizable chunk of time off from working, or at least working in the way we are now. Something like perhaps 2-3 years. The reason for the break would be to re-orient our lives better with our values, and, mostly to work on some ambitions that are not getting their full due attention in our current situation. These are quite personally important concerns, but are being allowed to get put indefinitely on the back burner while we just get through our day-to-day, week-to-week life. And this is even though we--unlike many workers these years it seems--actually do have the time to work on these things right now; it's just that we just don't feel we are in a good personal context/space/place to really be able to engage those ambitions as well as they deserve. In fact, the context is quite inappropriate for it, it feels to me.

The time off would certainly entail moving to another part of the U.S., finding as close to perfect location to set up shop on these ambitions, and then living off our savings and/or doing some small part-time work (one or both) or small entrepreneurship to bring in some money to partly or fully fund this (presumably cheap) life. We have enough savings to live off of--depending on the burn rate--for a few good years. With experience, I've come to conclude that nothing much can get done in one calendar year--at least by me!--so that is why I suggest a few years.

The Hesitation

But we have not yet ever come close to making this break purely because of understandable financial caution. There are good reasons to be cautious or to be motivated to stay with what we have: We are currently both employed at the same employer, and save what I consider a healthy chunk of money each year, enough to put us on course for a decently funded retirement and a modest-but-paid-for house by the time we are at retirement age (provided inflation doesn't go bananas in the interim) in about 20 or so years. We also have health insurance through our employer and other benefits, which we would not have if unemployed.

Lastly, our career trajectories forward are anything but robust/reliable, so, whether we take a break or not, future earnings seem dicey from my current vantage--it's very hard for me to predict. I am also very loss averse, so it is painful to consider spending down what it took years to build up. For all these reasons, we have slogged on with our current situation while we have it. It could surely be worse, but there is this feeling that it is really not what we were "meant" to be doing and old saws about "On their deathbeds, no one ever says I wish I spent more time in the office," or "you don't want to be the richest man in the graveyard," or "Do what you love, the money will follow" ping around my head from time to time and make me wonder if this is currently a bad plan.

EDIT: Two answerable and related questions

• Is there a search engine searchable term(s) for this sort of action? (That is, is there a conventional way of describing such an action in the personal finances literature. I.e., we all know what a retirement is, but what is this?). If so, what is it?
• What are the key financial dangers in this action?

Answer 1

A brief time off, often 7-12 weeks is called a sabbatical. What you propose is far beyond that and unless you have it well planned out, you risk burning through all your savings and perhaps more. Most of us are planning a retirement and have some idea of the savings needed. You first need to plan this 2-3 year hiatus, and then for both of you to get rehired, and start the savings again. I envy anyone who can manage to do this while they are young enough to enjoy it.

Answer 2

Besides spending all your money, and then not being able to find a new job when you want to and where you want to, the biggest risk is the lack of health insurance.

Research your options regarding your existing insurance under COBRA. It will cover your preexisting conditions at the full price of the insurance, that means without the contribution from your employer. Make sure you have fully investigated the options to understand your out of pocket maximums, and the full price of insurance.

You will also have to understand the maximum amount of time you are covered under COBRA. If your unemployment goes beyond that period of time, you will have to get individual insurance. You need to avoid a gap in coverage or when you do get a new job, the insurance may not cover some preexisting conditions.

Before NASA send astronauts to the space station for months, they give the astronauts a full physical, including a visit to the dentist and eye doctor. It would be advisable to do the same before announcing to the employer that you plan on quitting. the insurance will generally transition to the COBRA program at the end of your last work day.

Because both of you work you could do the transition is phases. One would quit, then spend their time getting the sabbatical site established. The insurance would come from the employed spouse during this transition.

Some employers do have sabbatical programs where they will ease your transition if you are going to work on your education full time, or work for a charity. They will need you to return at the end of an agreed time period.

Even if they don't have a official sabbatical period they usually have a reemployment plan. If you return before the time period expires, usually one or two years, you aren't considered a new employee. That can be important for years of service calculations for a pension, vacation and sick leave earned, 401K matching.